Q&A CBG

Coalbed gas (CBG) is a significant resource in B.C. and can provide some of the natural gas we need to heat our homes, cook our food and for other energy uses.

CBG can also provide key benefits – including providing much-needed energy as well as revenue to the province supporting health care, education and jobs to communities.

The following includes some common questions about CBG. If you don’t find your question answered here please contact the Ministry directly at: CBGInfo@gov.bc.ca

General Coalbed Gas Questions

What is coalbed gas?

Coalbed gas is natural gas found in coal seams. Coalbed gas is almost identical to the conventional natural gas that is being produced and consumed today by over 900,000 residential, commercial and industrial customers in B.C. It is comprised of about 90 to 100 per cent methane and may contain carbon dioxide, nitrogen and traces of other hydrocarbons. It can be found in almost every coalfield across the province. Coalbed gas is a “sweet” gas as it does not contain hydrogen sulphide.

Why is CBG considered a clean energy source?

Natural gas is the cleanest burning of all fossil fuels because of its high hydrogen content. When natural gas is used in place of other fossil fuels, emissions of greenhouse gases can be significantly reduced. Unlike conventional natural gas, CBG is produced at low pressures. The gas is of near-pipeline quality when produced and typically does not require extensive processing.

Is coalbed gas included in the BC Energy Plan?

In February 2007, the Provincial Government released the BC Energy Plan. In addition to many exciting new initiatives and policies, the BC Energy Plan clarifies and enhances British Columbia’s commitments to making its coalbed gas production the most environmentally responsible in North America:

Fully engage local communities and First Nations in all stages of development;
use the most advanced technology and practices that are commercially viable to minimize land and aesthetic disturbances.
Not surface discharge any produced water. Re-injected produced water must be injected well below any domestic water aquifer;
Meet any other conditions the Oil and Gas Commission (OGC) may apply.
Demonstrate the company's previous experience with coalbed gas development.
Information must be made publicly available as to how the company plans to meet and be accountable for these best practices.

Why is government interested in the development of coalbed gas?

The natural gas industry provides important economic diversification, job creation and revenue opportunities for British Columbia. As the owner of natural resources on behalf of the people of British Columbia, the Province has an obligation to make the most of these resources, both in terms of providing energy sources, revenue and benefits to British Columbians. The province’s coalbed gas potential is estimated to be more than 80 times its current annual production of natural gas.

CBG is an important part of B.C.’s energy mix that includes other conventional natural gases, oil, hydro-electricity and alternative energy sources. In addition to being an important energy source, natural gas is used in products we use everyday, such as medicine, plastics, skin cream, clothing, fertilizer and paint.

Coalbed Gas Activity Throughout B.C.

How much coalbed gas development is there in B.C.?

There is no full scale commercial production of CBG in the province. As of December 2007, a total of 87 CBG wells and test holes have been drilled in B.C.

How much coalbed gas is estimated to be in the coalfields?

B.C. has an estimated resource potential of 84 Tcf of coalbed gas from coalfields around the province. Information on the CBG estimated resource for specific coalfields can be found in the: Coalbed Gas Potential in British Columbia, Petroleum Geology Paper 2004-1.

What lands will be considered for coalbed gas development?

CBG development can only proceed in areas where significant coal deposits exist. It is not allowed in designated parks or other protected areas. Existing and future land use plans also guide area-specific activities.

In what areas of B.C. have companies been exploring for CBG?

Exploration for coalbed gas is taking place in the following areas of British Columbia:

Northeast – west of Fort St. John and near the District of Hudson’s Hope.
Northwest – in the Klappan coalfield.
Southeast – in the Elk Valley.
South – near Princeton and in the region.
Vancouver Island – mid - to north region of the east coast.

What is the process to initiate CBG activity in B.C.?

Applicants must apply for a Petroleum and Natural Gas tenure.

Prior to receiving tenure, proponents may apply to the OGC for approvals to conduct geophysical activities or drill test holes but may not produce any gas.

After securing tenure, the company must get approval from the OGC for ground activities such as drilling, acquiring seismic surveys and roads. This involves working collaboratively with local First Nations and securing landowner permission if the operation requires access on private land.

Issuing Tenure

Who owns the CBG in B.C.?

Most of the oil and gas in B.C. is owned by the Province and referred to as Crown oil and gas. A small percentage of oil and gas is owned privately and an even smaller percentage is owned by the federal government.

Under British Columbia’s Coalbed Gas Act, coalbed gas is natural gas. The issuance of rights to Crown coalbed gas is under the Petroleum and Natural Gas Act.

Who is responsible for administration and management of petroleum and natural gas rights?

The Ministry of Energy, Mines and Petroleum Resources is responsible for administering and managing petroleum and natural gas rights in B.C. through the legislated tenure process. The petroleum and natural gas rights are usually acquired by companies through a monthly auction process. The Oil and Gas Commission is responsible for regulating oil and gas activities.

What is tenure?

Tenure is time-limited ownership of a specific parcel of subsurface petroleum and natural gas rights. Tenure grants the right to apply to the OGC to access, explore and develop petroleum and natural gas in accordance with applicable statutory regulations. Although tenure is not required to drill test holes or conduct geophysical exploration, permission from the OGC is required before any company undertakes these activities.

Besides Crown sales, is there any other way tenure is awarded?

Yes, another way tenure may be acquired is by a issuance under S.72 of the Petroleum and Natural Gas Act. The Minister seeks approval to issue tenure. If Government approves, tenure will be issued by an order-in-council.

How is the tenure decision made and by whom?

Before making a decision on tenure, the Ministry refers tenure requests to local governments, First Nations and provincial agencies which have a legislated responsibility to provide comment or have other government to government links to the process.

In northeast British Columbia, where the majority of oil and gas exploration and development take place, responses are generally requested within a 30-day period.

In other regions where local governments, First Nations and government agencies maybe unfamiliar with oil and gas issues, the referral response may be extended to ensure that there is ample opportunity for the referral participants to evaluate the proposal and provide comments.

The end of the referral is not a decision date, but a timeframe by which the Ministry seeks to receive a response and advice from those referral agencies which have legal or jurisdictional interests in the proposed tenure area. The government reviews and considers all information received in making a decision on whether or not to grant tenure, as well as in developing any terms and conditions of tenure.

Before a tenure agreement can be finalized, the parcel must be removed from Crown Reserve designation. This is accomplished by a Minister's Order under Section 72(1) of the Petroleum and Natural Gas Act.

The decision to make a direct award of tenure to land removed from Crown Reserve is made by Government.

The decision to issue tenure sold in public tender or at auction is made by the Minister of Energy, Mines and Petroleum Resources.

What is the Ministry’s normal referral process?

Referral letters are sent out to the organizations such as:

· Ministry of Forests

· Ministry of Environment

· Ministry of Transportation

· Ministry of Agriculture and Lands

· Integrated Land Management Bureau

· Integrated Registry Branch

· Oil and Gas Commission

· Local Governments

· First Nations

The Ministry’s referral process is consistent with provincial land policy. As part of this process, the Ministry reviews existing land uses and community plans in its decision on tenures.

What rights do landowners have during CBG activity?

Companies seeking tenure must explain the details of proposed CBG activity to landowners before work starts on private land. The two parties must negotiate a surface-use agreement detailing how they will work together and how compensation will be paid.

Proponents must reclaim the land in a reasonable amount of time and/or compensate the landowner for damages or permanent alterations based on fair market value of existing land use.

The Province’s Mediation and Arbitration Board is in place to resolve outstanding issues.

Community Engagement

What is the difference between community engagement and community consultation?

These words are often used interchangeably, but they generally describe a process of obtaining public feedback in order to make an informed decision.

In accordance with the best practices outlined in the BC Energy Plan, companies with an approved project proposal must engage in a pre-tenure community and First Nations engagement and information disclosure process. Companies are also required by the Oil and Gas Commission to conduct public consultation prior to submitting applications at every stage of development.

What does the Ministry do with community input?

Community input is compiled, documented and, where appropriate, referred to in establishing conditions on the tenure and on exploration permits.

Proponents are asked to draft a community engagement report detailing its engagement process. The Ministry also may draft a community engagement report in areas where the Ministry has undertaken engagement activities. This report summarizes input received from both the Ministry’s community engagement and referral processes. These reports are provided to government decision makers and provide guidance to the proponent.

Do you consult with First Nations?

Yes, the Ministry has an obligation to consult with First Nations.

What are the requirements for the proponent to engage with communities and First Nations?

The BC Energy Plan states the proponent’s obligation to fully engage local communities and First Nations in all stages of development, as well as to make information publicly available as to how the company plans to meet and be accountable for the BC Energy Plan best practices.

Resource Development

What is the role of the Oil and Gas Commission (OGC)?

In B.C., the Oil and Gas Commission regulates oil and gas industry activities as well as CBG development. This regulatory agent works closely with other agencies, such as the Ministry of Environment, to ensure that oil and gas activity is conducted responsibly.

The regulatory roles of the OGC are to:

1. Assess oil and gas applications;

2. Ensure compliance with, and enforcement of, regulations for all oil and gas activities, and

3. Consult with First Nations on oil and gas applications.

Prior to each phase of exploration or development, a company must submit an application to the OGC.

The OGC applies specific terms and conditions to each exploration/development phase approval to which the company must comply.

How is a CBG well site developed and what will it look like?

When drilling occurs, the company removes the top soil from the plot of land and stores it in piles along the border of the plot (100m x 100m). The drilling rig is brought in and the well is drilled and fracced. This process takes about a month. If the company does not find a suitable resource, the site is reclaimed, the topsoil replaced and the well is sealed with cement. If the company decides to produce from the well, they will construct and bury the pipeline, install a wellhead at the site, and return the topsoil. The wellhead is quite small, only a few meters in height and diameter, and generally is surrounded by a barrier or a shed to prevent damage.

How is CBG produced?

CBG is normally produced by drilling into the coal seam. Water is pumped out of the seam reducing pressure and releasing the gas. Many companies produce CBG from 200 meters to two kilometres below the surface.

What is “fraccing”?

To stimulate the well, various fluids are pumped into the coal seams under pressure to increase water and gas flow by widening existing natural fractures, a process called fracturing or “fraccing”. This allows natural gas trapped in coal seams to move freely and flow into the well bore. The fluids used are generally biodegradable organic materials, a mixture of nitrogen and water to create thick foam - simply water with a small amount of biodegradable gel. Clean sand can be mixed with these liquids to help hold open the small fractures created.

Are chemicals used to stimulate CBG production?

Under normal circumstances, during drilling, fresh water is used in combination with drilling mud, which is typically naturally occurring clay. Other organic additives may be included to condition the mud. During the fraccing process, biodegradable organic materials are used.

Will CBG development result in new roads?

New roads may be required; however existing roads and trails would be used whenever possible to minimize new road construction. Roads and trails, when no longer used, are deactivated and/or reclaimed.

What is the lifespan of a CBG well?

Generally, the lifespan of each CBG well ranges from six to 25 years. The lifespan of a CBG well varies from project to project, depending on geological factors and technology used to produce the gas.

What is the spacing for CBG wells?

Well spacing required to produce CBG is regulated by the OGC and determined by a variety of factors, including geology and completion technology. Well spacing is determined at the earliest opportunity during exploration, evaluation or development.

CBG wells may require closer spacing than conventional oil and gas wells to optimize gas recovery. Commercial CBG production can require up to eight wells per square mile.

On private land or leased Crown land within the Agricultural Land Reserve, government has set a limit of four wells per section for coalbed gas production.

Land that is not part of the Agricultural Land Reserve is assessed on a case-by-case basis, taking into account the resource itself, community concerns, the equipment used and the local environment and wildlife.

Are there minimum setback regulations for well construction around residential or other areas?

Wells cannot be constructed within 80 metres of any permanent building or public space.

What has been done to ensure that CBG development is safe?

CBG is a natural gas similar to the gas already used to heat homes, cook food and generate electricity. B.C. has learned from the experiences in other jurisdictions, such as the USA, so that we can safely develop this resource. CBG has been a part of the energy mix in other jurisdictions for years.

Safety is a top priority of the provincial government as well as for the companies and individuals working in the CBG industry. There is a large body of regulation with the OGC, WorkSafeBC, and other agencies to protect workers and the public.

In British Columbia, the OGC and WorkSafeBC hold regulatory authority over the industry’s safety standards. Before being granted permission to operate, companies are required by the Pipeline Act and Pipeline Regulation to have an emergency response plan (ERP). Provincial authorities must approve this plan. With an ERP and the required safety devices in place, emergency situations can be readily detected.

Benefits/Costs

What benefits can the community expect from CBG?

Economic impact of individual projects is unknown until the company completes exploration activities and feasibility studies. A typical CBG field in other jurisdictions has created 150 jobs in its two- to five-year development phase and 25 jobs in ongoing production. A commercial operation can provide stable employment for many decades.

Is CBG used within the local communities?

Natural gas is a commodity. The gas you are using at home is mixed in the pipeline so except for when you actually buy from the producer, you cannot determine the actual origin of that gas.

How are prices set?

Any increase of supply should help reduce prices - if all other variables remain constant. However, in reality, demand also changes, so the final result in prices can vary according to the relative movements of the supply curve (gas available for consumption) and the demand curve (natural gas that people want to buy).

What might the impacts on tourism and tourism industry suppliers be? Will it affect our other major industries; forestry, mining and guide outfitting?

Throughout B.C., there are many examples of resource development (forestry, mining, oil and gas development) successfully co-existing with commercial tourism operations on the same land base. For example, the mining and tourism industries have signed a Memorandum of Understanding that guides their co-existence in many areas.

What will happen to hunting, fishing and outdoor recreation?

Outdoor recreation can co-exist with CBG exploration, although hunting restrictions around industrial sites may be necessary for safety reasons.

Will the regional community receive direct financial benefits?

Municipal governments can financially benefit directly from any businesses or related activity within municipal boundaries through taxes. The Province receives industrial taxes from activities conducted outside municipal borders; these help support province-wide programs like health and education.

Municipalities can benefit indirectly from any businesses or related activity paying taxes (i.e. service sector business - hotels, restaurants, contactors, and consultants) registered within municipal boundaries and through the increased activity in the area in general.

What about financial benefits such as the Fair Share agreement?

The Peace River Regional District (PRRD) and its local governments signed a Memorandum of Understanding (MOU) with the Provincial Government. The MOU stipulates the Province provide payment to the PRRD, which is then distributed to each municipality and the regional district under a special funding formula in lieu of property taxes. The Fair Share MOU was designed specifically to address the situation in north-eastern B.C. where such a large amount of activity related to the oil and gas industry takes place and where the PRRD has limited access to the industry tax base.

Areas elsewhere in B.C. are not in the same situation in terms of the volume of activity.

Will the value of our properties go up or down?

There are many factors that affect property values, only one of which might be local resource development. The size and footprint of the development could also be a factor in property value impacts. In B.C., regulations and best practices are in place, such as the requirement for no surface discharge of produced water, to minimize the impacts of CBG development.

What happens if the community is not in favour of CBG development?

We look at how to develop this important resource in a manner that is environmentally responsible and contributes to the local and provincial economy. The BC Energy Plan specifies that government will continue to encourage coalbed gas development with the intent of demonstrating that British Columbia is a leading socially and environmentally responsible coalbed gas developing jurisdiction.

Environmental Protection: Water

Why do CBG wells produce water?

CBG is natural gas attached to the coal and kept in place by the pressure of naturally occurring water in the coal seam. Extracting CBG normally involves pumping water from the coal seam in order to release the pressure and allow the gas to flow. Any water removed from underground is considered produced water.

Is produced water considered safe?

Produced water from CBG operations can vary in composition and quantity depending on geology. It may range from drinking-water quality to water that has about the same salinity as seawater. Produced water has varying amounts of sodium bicarbonate (baking soda) and sodium chloride (table salt). It is usually anaerobic (no dissolved oxygen) and warmer than surface water. At times there are also traces of inorganic and organic elements and compounds in produced water, such as iron and barium. The quality of the water varies depending on the unique subsurface characteristics of the area.

How will produced water be disposed of?

In February 2007, the Provincial Government released the BC Energy Plan. The BC Energy Plan indicates that companies will not be permitted to surface discharge any produced water. Any re-injected produced water must be injected well below any domestic water aquifer, a process which is regulated by the OGC.

In approving an application to re-inject produced water into the ground the OGC considers information such as the location and design of the re-injection well, the geological properties of the proposed underground area, and the composition of the water being injected. Companies must isolate the subsurface disposal areas from potential groundwater zones and prove that these formations will contain the anticipated volumes of re-injected water. To protect drinking water from possible cross-contamination, all disposal wells are lined with steel casing that is cemented into the well bore. The OGC also requires that there be monitoring conducted throughout the re-injection process.

Does the government know enough about CBG to move forward safely or should the precautionary principle of not advancing until all information is known be applied?

CBG is safely being developed in jurisdictions around the world and has been for many years.

B.C. is committed to responsible development, and our regulators have a good track record that embodies principles of environmental sustainability, public discussion, science-based decision making, and adaptive management.

How does the Province ensure that groundwater is protected?

British Columbia has made a commitment to not allow the surface discharge of water produced from any future coalbed gas operations and to require that any re-injection of produced water take place well below domestic water aquifers.

One of the purposes of the OGC is to regulate oil and gas activity while balancing environmental, social and economic outcomes. For example, the OGC requires companies to carry out water well testing within a one kilometre radius of a CBG well. Samples are taken before and after drilling to ensure that drilling does not affect groundwater wells.

Interaction between the well and the surrounding subsurface material is prevented by surface casing filled with concrete. The OGC requires that surface casing must be set below the base of all strata, known or reasonably expected to serve as a source of drinking water; surface casing must be set at least 25 metres into a competent formation. The OGC regulates re-injection of produced water to protect other groundwater sources.

Can you provide some more information about the baseline surface water sampling program the Ministry has initiated?

The Environmental Resource Information Project (ERIP) conducts baseline studies in Hat Creek, Similkameen, Crowsnest, Vancouver Island, Peace River and Telkwa Coalfield.

In these coalfields, streams that drain the coalfield are sampled and analysed by a laboratory for total dissolved solids, conductivity, turbidity, total suspended solids, total dissolved solids, major cations and anions, nutrients and 23 trace elements analyzed with a low-level analytical detection method. This information is available on the ERIP website at http://www.empr.gov.bc.ca/OG/oilandgas/EnvironmentalStewardshipProgram/ERIP/.

Environmental Protection

At what point will a CBG project initiate the Environmental Assessment process?

All oil and gas activity (including CBG wells) undergo environmental assessment, as regulated by the Oil and Gas Commission. The OGC requires companies to undertake assessments specific to an issue and appropriate to the phase of development.

An Environmental Assessment performed by the Environmental Assessment Office will be performed if the CBG project triggers certain requirements under the Environmental Assessment Act. For example, groundwater extraction, and pipeline construction could trigger an Environmental Assessment if they cross the thresholds set out in the Act. Environmental Assessments may also be performed at the request of the Minister of Environment or the proponent.

How does CBG production affect the air quality?

In terms of air quality, gas flaring - burning the gas to dispose of it – is minimal and limited to short-term testing periods in new areas to prove commercial viability. All flaring activities require approval from the OGC. In order to facilitate environmentally responsible oil and gas development, the BC Energy Plan includes a requirement for routine flaring at oil and gas producing wells and production facilities to be eliminated by 50 per cent by 2011 and 100 per cent by 2016.

Since CBG is a pure or "sweet" gas, it usually requires little processing before entering the pipeline that takes it to your home. This means that emissions can be significantly lower than those produced during the processing of conventional oil and gas.

Why doesn’t B.C. complete all environmental baseline studies before tenure disposition and development?

The Ministry’s Environmental Resource Information Project (ERIP) has compiled over 2,000 public sources of information on past studies in B.C. coalfields. Most coalfield regions of B.C. have a tremendous number of existing environmental, wildlife, water, agricultural and other land use studies.

Since CBG development usually takes several years from exploration to natural gas production, there are opportunities for the proponent or the Province to identify and address baseline inventory issues parallel with regulated activity.

Tenure disposition and collecting baseline environmental information are two separate processes.

How will visual and noise impacts be minimized to ensure quality of life is maintained?

During the application review process, the Oil and Gas Commission reviews all information, making decisions in the public interest, considering environmental, economic and social outcomes.

The OGC considers residents’ concerns in its decision making process, and in many cases will work with the company to mitigate the issues and may recommend or impose restrictions on company operations.

The OGC may require the use of natural visual barriers employed to conceal CBG operations, and can require a company to plant more shrubs and trees if the level of concealment is inadequate for neighbours.

What is the Environmental Resource Information Project (ERIP)?

The Environmental Resource Information Project provides online access to environmental baseline information and also conducts new related studies.

ERIP is a collaborative effort between the Ministry of Energy, Mines and Petroleum Resources, the Ministry of Environment, community groups, First Nations, industry and other governments to contribute to responsible oil and gas development, including coalbed gas, in the Province.

The Environmental Resource Information Project (ERIP) includes:

ERIP Database: a searchable web-accessible bibliography of existing reports and databases with the ability to customize search and report features related to a specific geographic area or a particular topic
Baseline Surveys: a collection of reports on environmental data in key coalfields

These data are available on the ERIP website at http://www.empr.gov.bc.ca/OG/oilandgas/EnvironmentalStewardshipProgram/ERIP/Pages/default.aspx.

How will species at risk (red and blue-listed species) be protected?

CBG exploration and development will need to accommodate and manage for species at risk in accordance with applicable statues and regulations, best practices, and government approved land use plan direction.

What is being done to minimize habitat fragmentation by the construction of new roads and wells?

The OGC requires that a project be designed to minimize surface land impacts and fragmentation of the natural habitat. Surface land impacts can be minimized by drilling multiple wells from a single surface location, by aligning roads or pipelines along natural field breaks, and by utilizing existing infrastructure. For more information on minimizing surface impacts visit:

http://www.empr.gov.bc.ca/OG/.../CoalbedGas/TechandRegInfo/

How does coalbed gas development fit in with B.C.’s progressive policies on greenhouse gas reduction?

Coalbed gas is one of the cleanest burning of all fossil fuels. The BC Energy Plan includes requirements to reduce greenhouse gas emissions within the oil and gas industry. While the BC Energy Plan also includes initiatives to conserve energy and develop new, renewable energy sources; natural gas is still very important to British Columbians.

While CBG currently contributes a relatively small amount to government revenues, its contribution is expected to increase as the industry develops from the initial exploratory phase into commercial production.

In fact, each year British Columbians use approximately 250 billion cubic feet of natural gas for heating, cooking, and a myriad of other uses. It is important for our economy and energy needs that we find and develop new gas resources.

EMPR

How is a CBG well site developed and what will it look like?